Playing the Momentum Building in Cognizant Technology Solutions

Published on Thursday, 26 August 2010 06:20 Written by Christian Paolinetti

New York, August 26th (TradersHuddle.com) - Shares of Cognizant Technology Solutions Corporation (NASDAQ:CTSH) closed the trading session at $58.18 placing the price action in a very tight range, given that calculated support is set at $57.55 and the calculated resistance based on an algorithm of peaks and troughs is set at $60.75

Cognizant Technology Solutions Corporation (NASDAQ:CTSH) provides custom Information Technology (IT) consulting and technology services as well as outsourcing services. The Company focus in technology strategy consulting, complex systems development, and enterprise software package implementation.

Cognizant's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Cognizant's price action, as any movement outside its predefined range of $57.55 and $60.75 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $57.55 could spark above average selling. A tiered approach can be a good way to approach starting a position in Cognizant's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.